MZI RESOURCES LTD 22 January 2016
Company Announcements Office ASX Limited
Level 40, Central Park
152-158 St Georges Terrace PERTH WA 6000
Dear Sirs
Attached please find the MZI Resources Ltd (the Company) Notice of General Meeting and Proxy Form which has been dispatched to shareholders today.
The abovementioned document will be available on the Company's website www.mzi.com.au.
The Company refers to its announcement on 3 November 2015 "Capital Raising Update" and provides the following revised timetable regarding the approval for the issue of the Tranche 3 shares of the capital raising and the offer of shares under a share purchase plan (SPP) to existing eligible shareholders.
SPP Record Date | Monday 26 October 2015 |
General Meeting (Approval of Tranche 3 shares) | Wednesday 24 February 2016 |
SPP Opening Date | Thursday 3 March 2016 |
SPP Closing Date | Wednesday 23 March 2016 |
SPP Issue Date | Thursday 31 March 2016 |
Dispatch SPP holding statements | Friday 1 April 2016 |
*Dates are indicative only and subject to change.
Yours sincerely
John Traicos Company Secretary
00101397-001
West Perth, Western Australia, 6005
The Independent Expert has concluded that the issue of Tranche 3 Placement Shares to RCF is not fair but reasonable to Shareholders.
This Notice of General Meeting, Explanatory Statement and the accompanying Independent Expert's Report should each be read in its entirety.
If Shareholders are in doubt as to how they should vote, they should seek advice from their professional advisers prior to voting.
Should you wish to discuss the matters in this Notice of General Meeting please do not hesitate to contact the Company Secretary on (+61 8) 9328 9800.
Notice of General Meeting (setting out the proposed resolutions) 3
Explanatory Statement (explaining the proposed resolutions) 5
Glossary 15
Annexure A - Independent Expert's Report 16
Annexure B - Key terms of the Employee Share Trust Plan 17
Proxy Form Insert
The General Meeting of the Shareholders to which this Notice of General Meeting relates will be held at 11.00am (WST) on Wednesday
24 February 2016 at:
City West Receptions 45 Plaistowe Mews
West Perth, Western Australia, 6005
The business of the General Meeting affects your shareholding and your vote is important.
To vote in person, attend the General Meeting on the date and at the place set out above.
To vote by proxy, please complete and sign the enclosed Proxy Form and return by the time and in accordance with the instructions set out on the Proxy Form.
Notice is given that a General Meeting of Shareholders will be held at 11.00am (WST) on Wednesday, 24 February 2016 at City West Receptions, 45 Plaistowe Mews, West Perth, Western Australia, 6005.
The Explanatory Statement provides additional information on matters to be considered at the General Meeting. The Explanatory Statement and the Proxy Form are part of this Notice of General Meeting.
The Directors have determined pursuant to Regulation 7.11.37 of the Corporations Regulations 2001 (Cth) that the persons eligible to vote at the General Meeting are those who are registered Shareholders at 11.00am (WST) on Monday 22 February 2016.
Terms and abbreviations used in this Notice of General Meeting are defined in the Glossary.
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AGENDA
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RESOLUTION 1 - ISSUE OF TRANCHE 3 PLACEMENT SHARES
To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution:
"That, for the purposes of ASX Listing Rule 10.11, section 611 item 7 of the Corporations Act 2001 (Cth) and for all other purposes, approval is given for the issue of 31,128,557 fully paid ordinary shares in the capital of the Company to Resource Capital Fund VI L.P. in connection with Tranche 3 of the Placement and described in more detail in the Explanatory Statement."
Voting Exclusion: In accordance with section 611 item 7 of the Corporations Act and the ASX Listing Rules, Resource Capital Fund VI L.P. and its Associates are excluded from voting on Resolution 1 and the Company will disregard any votes cast on Resolution 1 by Resource Capital Fund VI L.P. and any of its Associates.However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.
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RESOLUTION 2 - ISSUE OF SHARE UNITS TO MANAGING DIRECTOR - MR TREVOR MATTHEWS
To consider and if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution:
"That, for the purpose of ASX Listing Rule 10.14 and for all other purposes, approval be given for the issue to Mr Trevor Matthews under the Employee Share Trust Plan of:
up to $413,674 of Share Units; and
the issue, and subsequent acquisition by Mr Matthews, of Shares in the Company in respect of those Share Units,
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MAJORITY REQUIRED FOR RESOLUTIONS TO BE PASSED
Resolutions 1 & 2 will be passed if at least 50% of the votes on that Resolution (either in person, proxy, attorney or by corporate representative) are in favour of that Resolution.
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PROXIES
Each Shareholder that is entitled to attend and vote is entitled to appoint a proxy. The proxy does not need to be a Shareholder. A Shareholder that is entitled to cast two or more votes may appoint not more than two proxies to attend and vote on their behalf. The person or persons so appointed need not necessarily be Shareholders. Where two proxies are appointed, each proxy should be appointed to represent a specified portion or number of the Shareholder's voting rights (failing which each appointee will be entitled to cast half the Shareholder's votes).
A Proxy Form together with instructions on how to complete the Proxy Form is attached.
To vote by proxy, please complete and sign the enclosed Proxy Form and return it to Computershare Investor Services Pty Limited by:
Mail to:
Computershare Investor Services Pty Limited GPO Box 242
Melbourne Victoria 3001 Australia; or
Facsimile to:
1800 783 447 (within Australia) or
+61 3 9473 2555 (outside Australia); or
Online:
At www.investorvote.com.au; or
By Mobile:
- IMPORTANT INFORMATION CONCERNING PROXY VOTES ON RESOLUTION 2
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RESOLUTION 1 - ISSUE OF TRANCHE 3 PLACEMENT SHARES
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Background
As Shareholders will recall, the Company entered into a funding package with its major shareholder, Resource Capital Fund VI L.P. (RCF) in 2014 to assist the Company to fund the development of its flagship Keysbrook Project south of Perth, Western Australia (the Funding Package). As part of that Funding Package, RCF agreed to provide up to US$33.5 million to the Company by way of funding under a bridge finance facility in four separate tranches (Bridge Finance Facilities), in addition to providing a US$21 million 54 month convertible loan facility (Convertible Loan Facility) and purchasing a royalty from the Company to assist with the funding of the Keysbrook project.
The Bridge Finance Facilities were designed to provide a flexible funding support mechanism for Keysbrook project development activities as well as for the Company's corporate purposes. The key terms of the Bridge Finance Facilities were disclosed to Shareholders in detail at the time Shareholders approved the provision of the Funding Package, and the potential increase in RCF's voting power in MZI as a result of that Funding Package, in late 2014.
As Shareholders will be aware, production of heavy mineral concentrate has now commenced at Keysbrook three weeks ahead of schedule and on budget, with first sales of product to customers occurring on 19 December 2015 ahead of the original early 2016 target date. Accordingly, the Company has commenced generating cash flow from its operations from which it can service its obligations under its various debt facilities, and, in particular, the RMB Facility in the short term.
Under the terms of the Bridge Finance Facilities, amounts drawn down under that facility were to be drawn in tranches and were required to be repaid within 12 months of the date of first drawdown, failing which the balance of the relevant tranche will automatically convert into a fixed term convertible loan facility on similar terms to the Convertible Loan Facility. As interest on any such convertible loan facility would be at 10% per annum with an inability on the Company to prepay any such facility earlier than its stated maturity date, the repayment of the Bridge Finance Facilities on or before their maturity date would avoid any such convertible loan facility coming into existence.
To this end, the Company announced on 27 October 2015 that it had received commitments from investors (including RCF) to participate in a capital raising to enable the Company to repay amounts drawn down under the Bridge Finance Facilities and to provide the Company with a sufficient level of working capital. The proposed capital raising, when combined with the $2 million SPP (share purchase plan) to be offered to eligible Shareholders, is expected to raise approximately $45 million, enabling the Company to repay amounts drawn down under the Bridge Finance Facilities in their entirety prior to their relevant maturity date. RCF agreed to waive certain requirements of the Bridge Finance Facilities to enable the capital raising to occur.
Under the capital raising, to be undertaken via the Placement, the Company received commitments to subscribe for a total of 106,837,381 Shares in the capital of the Company at $0.40 per Share, in a series of tranches as follows:
Tranche 1 - 8,723,203 Shares which were issued on 30 October 2015 under the Company's 15% placement capacity in accordance with ASX Listing Rule 7.1, with the issue of those Shares ratified by Shareholders at the Company's Annual General Meeting held on 24 November 2015.
Tranche 2 - 66,985,621 Shares which were issued following Shareholders approving the issue of those Shares at the Company's Annual General Meeting held on 24 November 2015.
Tranche 3 - 31,128,557 Shares (being the Tranche 3 Placement Shares) to be issued to RCF subject to the approval of Shareholders being obtained.
Resolution 1 seeks the approval of Shareholders to the issue of the Tranche 3 Placement Shares to RCF for the purposes of section 611 item 7 of the Corporations Act, ASX Listing Rule 10.11 and for all other purposes. If Resolution 1 is approved by Shareholders, RCF's existing voting power in the Company is expected to increase to approximately 41.57%, noting that RCF's voting power will only increase to 40.54% if the full $2 million is raised under the SPP. The issue of the Tranche 3 Placement Shares, in conjunction with the potential issue of Shares previously approved by Shareholders (including Shares which may be issued under the Convertible Loan Facility in the future) may result in RCF ultimately having a voting power of up to 63.17% in the Company.
Further details relating to the issue of the Tranche 3 Placement Shares, including the advantages and disadvantages of the issue of these Shares, are set out in this Explanatory Statement and the Independent Expert's Report attached as Annexure A.
For the reasons set out in this Explanatory Statement, the Directors unanimously consider that the advantages to the issue of the Tranche 3 Placement Shares outweigh the disadvantages, and that the approval of the issue of the Tranche 3 Placement Shares is in the best interests of Shareholders. Accordingly, the Directors unanimously recommend that Shareholders vote in favour of Resolution 1.
In this regard, the Company notes that it has received statements from shareholders holding approximately 21.6 million Shares to the effect that they intend to vote in favour of the issue of the Tranche 3 Placement Shares to RCF. Further, Argonaut and Bell Potter (being the Joint Lead Managers to the Placement) have also confirmed to the Company that it is their intention to recommend their clients who are Shareholders vote in favour of any resolutions relating to the issue of shares under the Placement.
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Independent Expert's Report
To assist Shareholders in their consideration of the issue of the Tranche 3 Placement Shares (and how to vote on Resolution 1), the Board engaged BDO Corporate Finance (WA) Pty Ltd (Independent Expert) to prepare an Independent's Expert Report to provide an opinion on whether or not the Tranche 3 Placement Shares are 'fair and reasonable' to Shareholders not associated with RCF.
The Independent Expert's Report has been prepared in order to satisfy the requirements for Shareholder approval under section 611 item 7 of the Corporations Act, and sets out a detailed independent examination of the Tranche 3 Placement Shares to enable non-associated Shareholders to assess the merits and decide whether to approve Resolution 1. To the extent that it is appropriate, the Independent Expert's Report sets out further information with respect to the Tranche 3 Placement Shares.
The Independent Expert has concluded that the issue of the Tranche 3 Placement Shares to RCF is not fair but reasonable to Shareholders.
The Independent Expert has assessed the Transaction as a control transaction in accordance with the requirements of ASIC Regulatory Guide 111. The requirements of RG111 apply notwithstanding the fact that fewer Shares will be issued to RCF under the Transaction than would otherwise have been the case. The application of RG111 requires that a minority discount be applied to the value of MZI on a controlling basis. The Independent Expert has applied a discount of 26% to the valuation of MZI if the transaction proceeds. This discount, despite the higher level of control that RCF would achieve were the transaction not approved, cannot be applied to the value of MZI if the transaction were not approved. This results in the assessment that the transaction is not fair.
The Independent Technical Expert has used the market approach in valuing the Company's resources. This approach applies a value to MZI resource tonnes based on comparable transactions. No consideration is given to the comparable locations of the resource and their proximity to existing processing facilities and transport infrastructure. The Independent Expert is unable to include the Resources in cashflow valuations until they have been converted to Reserves. The Company notes that the majority of its Resources are located adjacent to its operations and considers there is a high level of confidence that they will be converted to Reserves.
Shareholders are urged to carefully read the Independent Expert's Report to understand its scope, the methodology of the valuation and the sources of information and assumptions made.
A complete copy of the Independent Expert Report is provided in Annexure A to this Explanatory Statement and is also available on the Company's website at www.mzi.com.au. Shareholders may request a hard copy of the Independent Expert's Report from the Company at no cost by contacting the Company by telephone on (+61 8) 9328 9800.
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Advantages and disadvantages of the issue of the Tranche 3 Placement Shares
Advantages of the issue of the Tranche 3 Placement Shares
The Directors believe that the issue of the Tranche 3 Placement Shares has the following advantages:
Simplifies capital structure
The issue of the Tranche 3 Placement Shares enables the Company to repay all amounts owing under the Bridge Finance Facilities in their entirety, thereby removing the potential for any outstanding amounts under the Bridge Finance Facilities to convert into a fixed term convertible loan facility on terms similar to the Convertible Loan Facility.
If such a convertible loan facility were to have come into existence, its terms would not permit early repayment by the Company in advance of its maturity date, and amounts outstanding under such a facility are only convertible into Shares at RCF's election (not at the election of the Company), which would have further complicated the Company's capital structure.
Repayment of the Bridge Finance Facilities before they convert into a convertible loan facility significantly simplifies the Company's capital structure by avoiding the creation of an additional interest bearing long term debt facility that is convertible into Shares.
Reduction in the maximum total voting power which RCF may acquire in the Company
In approving the RCF Funding Package in November 2014, Shareholders approved RCF acquiring voting power of up to 82.9% of the Company, being the maximum voting power that RCF could acquire in MZI at the time as a result of the issue of Shares under the Funding Package. The calculation of this maximum voting power included the potential for RCF to acquire Shares as a result of the Bridge Finance Facilities converting into a convertible loan facility which RCF subsequently converts into additional Shares.
Approval of Tranche 3 and the subsequent repayment of the Bridge Finance Facilities will avoid the creation of an additional convertible loan facility and therefore avoid the potential for the issue of Shares on conversion of any such additional convertible loan facility. The Independent Expert has assessed the maximum voting power which RCF can acquire in the Company if the issue of the Tranche 3 Placement Shares to RCF is approved at 63.17%.
Further strengthens the Company's relationship with its cornerstone investor
RCF has been a long term supporter of the Company and its Keysbrook Project.
RCF's participation in the Placement provides further evidence of RCF's confidence in, and support and commitment to, the development of the Keysbrook Project by its willingness to increase its equity investment in the Company at this point in time. In the absence of the issue of the Tranche 3 Placement Shares to RCF, the Company will be unable to repay amounts outstanding under the Bridge Finance Facilities before they automatically convert into a convertible loan facility.
The issue of the Tranche 3 Placement Shares improves the Company's balance sheet position (as a result of issuing Shares to satisfy liabilities in lieu of making cash payments) and provides an even greater equity incentive for RCF to support the development of the Keysbrook Project as well as the Company's other value creating initiatives.
Increased potential for Shareholders to receive dividends in the future
As indicated above, repaying amounts outstanding under the Bridge Finance Facilities prior to their maturity removes the potential for any outstanding amounts under the Bridge Finance Facilities to convert into a fixed term convertible loan facility. By doing so, it also removes the potential costs imposed on the Company associated with servicing interest obligations under any such convertible loan facility. As a result, the Company expects that it will be in a position to pay dividends to Shareholders sooner than would otherwise be the case if it had to make interest payments on any such convertible loan facility that comes into existence due to a failure to repay the Bridge Facilities in their entirety.
Disadvantages of the issue of the Tranche 3 Placement Shares
The Directors believe that the issue of the Tranche 3 Placement Shares has the following potential disadvantages:
Dilution of Shareholder interests
The issue of the Tranche 3 Placement Shares to RCF will dilute the equity interests of existing Shareholders who are not associated with RCF. However, whilst dilution is a disadvantage the level of dilution will be less than what otherwise would have occurred in the event the issue of the Tranche 3 Placement Shares is not approved. The effect of the issue of the Tranche 3 Placement Shares on RCF's voting power in the Company is shown in section 1.5 below.
However, the Directors believe that the benefits of the issue of the Tranche 3 Placement Shares set out above (in particular, the ability of the Company to repay the Bridge Finance Facilities) outweighs the disadvantages associated with the dilution of the equity interests of existing Shareholders who are not associated with RCF. It is noted that if the issue of the Tranche 3 Placement Shares is approved, eligible Shareholders will have the ability to acquire additional Shares in the Company at the same issue price as the Tranche 3 Placement Shares by taking part in the SPP. RCF will be unable to subscribe for Shares under the SPP, as it would be in breach of the takeover provisions under Chapter 6 of the Corporations Act if it were to participate.
Increase in RCF's control over the Company
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Why is Shareholder approval required for the Tranche 3 Placement Shares?
Shareholder approval under section 611 item 7 of the Corporations Act
Section 606 of the Corporations Act contains a prohibition on a person acquiring a relevant interest in issued voting shares in a listed company through a transaction which results in the person's voting power in the company increasing from below 20% to more than 20% or from a starting point of more than 20% to a higher percentage. An acquisition is not prohibited if it has been approved by a resolution of shareholders of the listed company in accordance with item 7 of Section 611 of the Corporations Act.
A "relevant interest" arises if (among other things) the person has the ability to exercise, or control the exercise of, a right to vote attached to shares. A person's "voting power" for these purposes means the total number of votes that the person and its associates has a relevant interest in, expressed as a percentage of total votes attaching to all shares in the entity.
Accordingly, Shareholder approval is being sought under section 611 item 7 of the Corporations Act to ensure that the Company may issue the Tranche 3 Placement Shares to RCF notwithstanding that the issue of those Shares will result in RCF increasing its voting power in the Company from a starting point of more than 20% to a higher percentage.
For the exception in section 611 item 7 of the Corporations Act to apply, shareholders must be given all information known to the person proposing to make the acquisition or their associates, or known to the company, that is material to the decision of how to vote on the resolution. In ASIC Regulatory Guide 74, ASIC has indicated what additional information should be provided to shareholders in these circumstances.
Neither the Company nor the Directors are aware of any additional information not set out in this Explanatory Statement, or the Independent Expert's Report attached as Annexure A, that would be relevant to Shareholders in deciding how to vote on the Resolution.
Shareholder approval required under ASX Listing Rule 10.11
ASX Listing Rule 10.11 provides that a company must not issue equity securities to a related party of the company, or a party whom the ASX considers that ASX Listing Rule 10.11 should apply, without approval of Shareholders by ordinary resolution.
ASX has informed the Company that RCF is a person whose relationship with the Company is such that ASX has determined that ASX Listing Rule 10.11 should apply to the issue of Shares to RCF under the Placement. Accordingly, the Company is also seeking Shareholder approval under ASX Listing Rule 10.11 for the issue of the Tranche 3 Placement Shares to RCF.
ASX Listing Rule 7.1
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Effect of the issue of Tranche 3 Placement Shares on RCF's voting power in the Company
Under Resolution 1, Shareholders are being asked to approve (amongst other things) RCF and its Associates increasing their voting power in the Company for the purposes of section 611 item 7 of the Corporations Act.
The following table outlines the Company's current capital structure and voting power of the Company's Shareholders, both prior to and after completion of the Placement.
Capital structure prior to Placement
Capital structure post issue of Shares under Tranche 1 and Tranche 2
Capital structure as at date of Notice of Meeting
Capital structure post issue of Tranche 3 Placement Shares
Number of Shares
Voting Power
%
Number of Shares
Voting Power %
Number of Shares
Voting Power
%
Number of Shares
Voting Power %
Existing Shareholders (other than RCF)
58,597,614
69.79
113,606,438
71.15
114,988,483
69.4%
114,988,483
58.43
RCF
25,370,420
30.21
46,070,420
28.85
50,694,204
30.6%
81,822,761
41.57
Total undiluted Shares
83,968,034
100
159,676,858
100
165,682,687
100
196,811,244
100
Explanatory notes and assumptions
Assumes that, other than as expressly provided, the Company does not issue any additional Shares or other convertible securities.
Assumes that RCF and its Associates do not acquire any further Shares other than under the Placement or as expressly provided for in the table. Shareholders should be aware that in certain circumstances the Funding Package enables the Company to elect to satisfy its obligation to pay interest and commitment fees in the form of Shares (rather than in cash) and that if the Company exercises such rights, additional Shares will be issued to RCF. Details of these potential Share issues were outlined in the shareholder meeting documentation provided to Shareholders at the time Shareholders approved the Funding Package in 2014. In addition, as detailed in section 1.8 below, as part of the arrangements agreed with RCF to enable the Placement to proceed, the Company is to satisfy its interest obligations in respect of amounts outstanding under the Convertible Loan Facility by way of the issue of Shares until such time as the Company has issued RCF with an additional 16,834,700 Shares. Full details of the impact that the issue of Shares under the previously approved Funding Package may have on RCF's total voting power, when combined with the issue of the Tranche 3 Placement Shares, is set out in the Independent Expert's Report provided in Annexure A to this Explanatory Statement.
Following completion of the issue of Shares under Tranche 1 and Tranche 2 of the Placement:
two separate issues of 976,882 Shares and 3,646,902 Shares (respectively) were made to RCF under the terms of the Funding Package (including, in part, for interest due under the Bridge Finance Facilities). Shareholders approved the issue of these Shares at the time Shareholders approved the Funding Package in 2014; and
1,382,045 Shares were issued under the Employee Share Trust Plan.
prior to the issue of Shares under Tranche 1 and Tranche 2 of the Placement, RCF and its Associates held 25,370,420 Shares, equating to voting power of approximately 30.21%;
after the issue of Shares under Tranche 1 and Tranche 2 of the Placement, RCF and its Associates held 46,070,420 Shares which equates to voting power of approximately 28.85%;
after the Shares under Tranche 1 and Tranche 2 of the Placement, but before the issue of Shares under Tranche 3 of the Placement, RCF and its Associates were issued, via two separate issues, 976,882 Shares and 3,646,902 Shares (respectively) under the terms of the Funding Package (including, in part, for interest due under the Bridge Finance Facilities), following which it held 50,694,204 Shares which equates to voting power of approximately 30.6%; and
after the issue of Shares under Tranche 3 of the Placement, RCF and its Associates will hold 81,822,761 Shares (reflecting the additional 31,128,557 Shares to be issued to RCF under Tranche 3), which based on the assumptions set out under the table above, will result in the voting power of RCF and its Associates increasing to 41.57%.
Accordingly, under Resolution 1, Shareholders are being asked to approve the potential for RCF to increase its voting power in the Company to 41.57% as a result of the acquisition of the Tranche 3 Placement Shares.
Shareholders should note that the table above does not reflect the issue of Shares to existing Shareholders under the proposed SPP. Shares will only be offered to existing eligible Shareholders under the SPP if Shareholders approve the issue of the Tranche 3 Placement Shares. RCF is ineligible to participate in the SPP. Accordingly if the SPP is fully subscribed, an additional 5 million Shares will be issued to existing eligible Shareholders which will have the effect of reducing RCF's voting power in the Company to 40.54%.
Finally, Shareholders should be aware that the issue of the Tranche 3 Placement Shares, in conjunction with the potential issue of Shares previously approved by Shareholders (including Shares which may be issued under the Convertible Loan Facility in the future) may result in RCF ultimately having a voting power of up to 63.17% in the Company as fully detailed in the Independent Expert's Report provided at Annexure A, which Shareholders should carefully read.
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RCF's intentions for the Company
Under the Funding Package approved by Shareholders in 2014, RCF was given a right to appoint one of its representatives (who must be a person reasonably acceptable to MZI) as a Non-Executive Director to the Company's Board. RCF is yet to exercise this right.
RCF has confirmed to the Company that it has no intention to:
make any changes to the business of the MZI Group;
inject any further capital into the MZI Group, although reserves the right to do so should it be required;
make any changes to the MZI Group's existing employees;
transfer any of the MZI Group's assets between the Company and RCF or its associates;
redeploy any of the MZI Group's fixed assets;
change the MZI Group's financial or dividend distribution policies.
The statements set out above are statements of RCF's current intention only and may vary as new information becomes available or circumstances change. RCF has provided the Company with this information to assist the Company to meet its obligations under ASIC Regulatory Guide 74. The Company takes no responsibility for any omission from, or any error or false or misleading statement in this section.
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Consequences if Resolution 1 is not approved
If Resolution 1 is not approved, any amounts outstanding under the Bridge Finance Facilities with RCF (currently US$8,715,996) will automatically convert into a convertible loan facility on terms substantially similar to the Convertible Loan Facility, and the Company will continue to pay interest at the rate of 10% per annum on the convertible loan facility (including the Bridge Finance Facilities principal) for the term of the facility, with no ability to pre-pay.
In addition, the Company has agreed with RCF that it will exercise its rights of election to pay interest under the Convertible Loan Facility and the Bridge Finance Facilities, and commitment fees under the Bridge Finance Facilities, through the issue of Shares instead of by payments in cash (subject to RCF requiring, in respect of a particular payment, that payment to be made in cash). Until such time as the Company is able to service interest and commitment fees from cash flow from ongoing operations, any election by RCF to require cash payments would place significant strain on the Company's working capital position.
As set out above, the offer of Shares under the SPP will not proceed if Shareholders do not approve the issue of the Tranche 3 Placement Shares to RCF.
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Additional information required by the Corporations Act and the ASIC Regulatory Guide 74
The following information is provided for the purposes of section 611 item 7 of the Corporations Act and ASIC Regulatory Guide 74: All Shares issued in connection with the Tranche 3 Placement Shares will be issued to RCF.
Any issue of Tranche 3 Placement Shares to RCF will be made in accordance with the terms of the Placement, except that the subscription moneys for those Tranche 3 Placement Shares will be satisfied by the deemed prepayment of the remaining principal outstanding under the Bridge Finance Facilities (subject always to there being no default by the Company, and no additional amounts becoming outstanding, under that facility).
The number of Tranche 3 Placement Shares that are to be issued to RCF is 31,128,557 Shares. The effect this will have on the capital structure of the Company is outlined in section 1.5 above. Approval is being sought to authorise RCF to increase its voting power in the Company to up to 41.57%. The voting power of RCF's Associates will be the same as the voting power of RCF.
An explanation of the reasons for the issue of the Tranche 3 Placement Shares, as well as the perceived advantages and disadvantages of the Tranche 3 Placement Shares, is set out in sections 1.1 and 1.3 above. As set out in section 1.10 below, all Directors voted in favour of the Company issuing the Tranche 3 Placement Shares, and have recommended that Shareholders vote in favour of Resolution
The reasons for the recommendation of Directors are also set out in section 1.10 below.
As part of the arrangements agreed with RCF to enable the Placement to proceed, the Company is to satisfy its interest obligations in respect of amounts outstanding under the Convertible Loan Facility by way of the issue of Shares until such time as the Company has issued RCF with an additional 16,834,700 Shares. Shareholders previously approved the issue of further Shares to RCF in satisfaction of interest at the time of approving the Funding Package in 2014. The Company has committed to RCF to only pay interest and commitment fees in cash if and to the extent that such cash has been generated from the Company's operations (that is, cash payments of interest and commitment fees cannot be made using the proceeds of the Placement).
The Company has agreed that until the date that is 1 month after the date of the meeting of Shareholders to which this Explanatory Statement relates, the Company will not solicit, invite, encourage or initiate any proposal involving the issue of Shares, or give effect to the issue of Shares, without RCF's prior written approval. This restriction does not apply to the issue of Shares or other equity securities to the Company's directors or officers, or the issue of Shares under the SPP if Resolution 1 is approved.
Other than as set out below or elsewhere in this Explanatory Statement, there are no contracts or proposed contracts between RCF and the Company or any of their Associates that are conditional on, or directly or indirectly dependent on, Shareholder approval of Resolution 1.
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Details of the Tranche 3 Placement Shares required in accordance with ASX Listing Rule 10.13
Name of person receiving securities
Maximum number of securities to be issued
The Tranche 3 Shares will be issued to RCF or its nominees.
31,128,557 fully paid ordinary shares in the capital of the Company will be issued to RCF under Tranche 3 of the Placement, being the subject of Resolution 1.
Date of issue It is anticipated that the Company will issue and allot the Shares to each of the persons the subject of Resolution 1 on or before 26 February 2016, but in any event within one month of the date of receipt of the Shareholder approval (or such later date as permitted by ASX waiver or modification of the ASX Listing Rules).
Issue price $0.40 per Share.
Nature of the relationship between RCF and the Company
Use or intended use of the funds raised
Voting exclusion statement
Pursuant to ASX Listing Rule 10.11.2, ASX has informed the Company that RCF is a person whose relationship with the Company is such that ASX Listing Rule 10.11 applies.
The funds raised from the issue of the Tranche 3 Placement Shares will be used to repay all remaining principal amounts owing under the Bridge Finance Facilities provided by RCF.
A voting exclusion statement for Resolution 1 is included in the Notice.
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Directors' recommendation
Based on the information available, including that contained in this Explanatory Statement and the Independent Expert's Report and the advantages and disadvantages outlined above, the Directors unanimously approve the proposal to put Resolution 1 to Shareholders. The Directors unanimously consider that the advantages to the issue of the Tranche 3 Placement Shares outweigh the disadvantages, and the issue of the Tranche 3 Placement Shares is in the best interests of Shareholders. Accordingly, the Directors unanimously recommend that Shareholders vote in favour of Resolution 1.
No Director has any interest in the Tranche 3 Placement Shares or the acquisition of Shares by RCF under the Placement generally.
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No other material information
Other than as set out in this document, and other than information previously disclosed to Shareholders, there is no other information that is known to the Company's Directors which may reasonably be expected to be material to the making of a decision by Shareholders whether or not to vote in favour of Resolution 1.
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RESOLUTION 2 - ISSUE OF SHARE UNITS TO MR TREVOR MATTHEWS
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Background
Resolution 2 seeks Shareholder approval for the issue of Share Units to, and subsequent acquisition of Shares by the Company's Managing Director, Mr Trevor Matthews under the Company's Employee Share Trust Plan (Share Plan). The Company carefully considers the remuneration of Mr Matthews as part of the Company's annual employee remuneration review process that occurs in June each year.
Under the Share Plan, which was approved by Shareholders at the Company's 2013 annual general meeting, eligible employees may be invited to apply for units in the Employee Share Trust (Share Units). The key terms of the Share Plan are summarised in Annexure B to this Explanatory Statement.
Subsequent to the year ended 30 June 2015, the Board commissioned an independent remuneration advisor to assist in the development of a comprehensive market based framework incorporating all aspects of remuneration including total fixed and variable remuneration under short and long term incentive programs. Following receipt of the independent advice and its recommendations, the Board approved the implementation of the Short Term Incentive (STI) and Long Term Incentive (LTI) Programs. The STI and LTI Programs are specifically aimed at driving long term performance for Shareholders, a culture of employee share ownership in the business and retention of executives, employees and staff.
The Board proposes to issue Mr Matthews (or his nominee) Share Units up to the value of $413,674, and provide an associated loan in respect to these Shares under the terms of the Share Plan. The issue of Share Units provides incentive awards under the Company's STI and LTI Programs and is subject to vesting conditions which are aligned to the interests of Shareholders.
As a Director of the Company, the proposed issue of Share Units to Mr Matthews requires the prior approval of Shareholders under the ASX Listing Rules. Accordingly, the Company is seeking Shareholder approval to issue the Share Units (and subsequent acquisition of Shares) to Mr Matthews.
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Vesting Conditions
Share Units allocated under both the STI and LTI Programs will vest subject to the satisfaction of certain performance criteria (Vesting Conditions). Each Share Unit, upon vesting, will entitle Mr Matthews to acquire one Share. Unless the Board determines otherwise, in the event that the Vesting Conditions are not met, the Share Units will not vest and, as a result, no new Shares will be acquired by Mr Matthews.
- Short Term Incentives
in accordance with the terms of the Employee Share Trust Plan and on the terms and conditions set out in the Explanatory Statement."
Scan the QR Code on your Proxy form and follow the prompts.
Custodian VotingFor Intermediary Online subscribers only (custodians) please visit www.intermediaryonline.com to submit your voting intentions. To be valid, properly completed proxy forms must be received by the Company no later than 48 hours before the Meeting.
A body corporate Shareholder may elect to appoint a representative, rather than appoint a proxy, in accordance with section 250D of the Corporations Act. Where a body corporate appoints a representative, the Company requires written proof of the representative's appointment to be lodged with or presented to the Company before the meeting.
If you return your Proxy Form but do not nominate a representative, the Chairman of the General Meeting will be your proxy and will vote on your behalf as you direct on the proxy form. If your nominated representative does not attend the meeting then your proxy will revert to the Chairman of the General Meeting and he will vote on your behalf as you direct on the proxy form.
The Chairman will vote undirected proxies in favour of Resolution 1. In respect of Resolution 2, Shareholders should refer to the important information below under the heading "Important information concerning proxy votes on Resolution 2".
The Corporations Act places certain restrictions on the ability of Key Management Personnel and their Closely Related Parties to vote on resolutions connected directly or indirectly with the remuneration of the Company's Key Management Personnel. Key Management Personnel of the Company are Directors and all other persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly. At the General Meeting, these laws will impact on Resolution 2.
For these reasons, Shareholders who intend to vote by proxy should carefully consider the identity of their proxy and are encouraged to direct their proxy as to how to vote on all Resolutions. In particular, Shareholders who intend to appoint the Company's Chairman as their proxy (including an appointment by default) are encouraged to direct the Chairman as to how to vote on all Resolutions.
If the Chairman of the General Meeting is appointed, or taken to be appointed, as your proxy, you can direct the Chairman to vote for, against or abstain from voting on Resolutions 2 by marking the appropriate box opposite Resolution 2 on the Proxy Form.
However, if the Chairman of the Meeting is your proxy and you do not direct the Chairman how to vote in respect of Resolution 2 on the Proxy Form, you will be deemed to have directed and expressly authorised the Chairman to vote your proxy in favour of Resolution 2 even though it is connected directly or indirectly with the remuneration of a member of the Key Management Personnel for the Company.
The Chairman intends to vote undirected proxies in favour of all Resolutions, including Resolution 2.
If you appoint a member of Key Management Personnel of the Company (other than the Chairman) or their Closely Related Parties as your proxy, you must direct them how to vote on Resolution 2. If you do not do so, you risk your vote not being cast.
This Explanatory Statement has been prepared for the information of Shareholders in connection with the business to be conducted at the General Meeting to be held at 11.00am (WST) on Wednesday, 24 February 2016 at City West Receptions, 45 Plaistowe Mews, West Perth, Western Australia, 6005.
The purpose of this Explanatory Statement is to provide information which the Directors believe to be material to Shareholders in deciding whether or not to pass the Resolutions in the Notice of General Meeting.
This Explanatory Statement should be read in its entirety before making a decision as to how to vote at the Meeting and should be read in conjunction with the accompanying Notice of Meeting and the Independent Expert's Report.
The issue of the Tranche 3 Placement Shares to RCF will increase RCF's level of control over the Company. This may reduce the likelihood of a takeover bid for the Company being made, either by RCF or another entity, and hence any control premium in the price of Shares. RCF's increased equity interest may also discourage other major Shareholders from acquiring further Shares, which could result in a decrease in liquidity of Shares on the ASX.
If Shareholders approve an issue of securities under ASX Listing Rule 10.11, ASX Listing Rule 7.2 provides that those securities will not be counted for the purpose of determining the Company's ability to issue new securities under ASX Listing Rule 7.1.
Accordingly, if Resolution 1 is approved by Shareholders, the issue of Tranche 3 Placement Shares pursuant to Resolution 1 will not be included in the calculation of the Company's 15% annual placement capacity for the purposes of ASX Listing Rule 7.1.
By way of summary:
Vesting Conditions for the STI Program are based on a number of specific Performance Objectives that need to be met in order for an award under the programme to be achieved. The STI Program provides for awards of incentive ranging from 50% to 150% of target. The value of Share Units and the maximum number of Shares to be acquired by Mr Matthews are based on achievement of Performance Objectives at target or 100%. Subsequent Shareholder approval will need to be sought in the event that achievement exceeds target.
Performance Objectives for the annual period to 30 June 2016 include targets related to improvement in OHS performance and systems implementation, business sustainability, growth and financial performance. The achievement of these objectives will contribute towards the generation of shareholder value. In addition, awards under the STI Program will only be granted where the Board has determined that the Company has achieved appropriate financial outcomes for the year ended 30 June 2016.
Details of the grant and vesting of Share Units under the STI Program are shown in the table below.
Total Number of Share Units | 494,185 |
Total Value of Share Units to Mr Matthews | $202,616 |
Maximum Number of Shares to be acquired by Mr Matthews upon successful vesting of the Share Units | 494,185 |
Remuneration Period Covered | 1 July 2015 to 30 June 2016 |
Vesting conditions | 75% of the Share Units vest on successful completion of the Performance objectives on 30 June 2016 25% of the Share Units are subject to a 12 month retention period from 30 June 2016 |
Vesting Dates | 75% on 30 June 2016 25% on 30 June 2017 |
MZI Resources Ltd. issued this content on 2016-01-22 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 2016-01-22 14:25:08 UTC
Original Document: http://www.mzi.com.au/index.php/investor-relations/asx-announcements/497-notice-of-meeting-and-spp-update/download
